Senate committee wraps up hearings on bill imposing absolute liability for pipeline operators

A federal bill proposing to impose absolute liability for “unintended or uncontrolled releases” of oil and gas from pipelines regulated by the National Energy Board is ready for third reading in the Senate.

Bill C-46, the Pipeline Safety Act, passed third reading in May in the House of Commons and was the subject of hearings last week before the Senate Standing Committee on Energy, the Enviroment and Natural Resources. That committee has sent the bill back to the Senate with no amendments.

If passed into law, Bill C-46 would require pipeline operators to “have a minimum level of financial resources and to keep a portion of these resources readily accessible for rapid response,” Natural Resources Minister Greg Rickford told the committee June 4 in French.

“The bill fulfills our commitment in the Speech from the Throne to enshrine the polluter pays principle into law,” Rickford added June 4, in English, in reference to the opening of the current session of Parliament in October, 2013. “This legislation mirrors the approach we have taken with marine, rail, and offshore safety and, in fact, I would submit, on nuclear safety as well.”

Related: Bill mandating railway insurance coverage reaches third reading

Rickford was alluding to Bill C-52, the Safe and Accountable Rail Act and to Bill C-22, the Energy Safety and Security Act. Bill C-22 was passed into law last February and Bill C-52 – which passed third reading in the Commons in May – has been referred to the Senate Standing Committee on Transport and Communications.

If passed into law, Bill C-52 would establish, for railways, “minimum mandatory insurance levels that are explicitly linked to risk,” Joe Preston, Conservative MP for Elgin-Middlesex-London, Ont., told the Commons earlier. Those requirements would range from $25 million to $1 billion.

With the passage of Bill C-22, Ottawa has increased absolute liability for nuclear operators – including nuclear power plants – from $75 million to $650 million. That level will be increased in phases, so that by February, 2018, the absolute liability will be $1 billion.

Bill C-22 also raised the financial capacity requirements for offshore petroleum drilling or producing firms to $1 billion.

With Bill C-46, the Pipeline Safety Act, Rickford is proposing to mandate that major crude oil pipeline operators would require financial resources – which could be insurance, bonds or guarantees – of up to $1 billion.

Related: Bill imposing $1 billion in absolute liability for pipeline spills tabled for third reading

“The bill makes explicit reference to the polluter pays principle that exists in common law, but will be written into the legislation,” said Jeff Labonté, director general the energy safety and security branch of Natural Resources Canada, of Bill C-46 during a Senate committee hearing May 26. “It introduces no fault or absolute liability that provides a prescribed amount for which companies are automatically responsible, whether at fault or negligent.”

He added liability “is unlimited should companies be at fault or negligent.”

The Pipeline Safety Act would also change the rules on abandoned pipelines.

“Currently where a company wants to abandon its pipeline, it needs to seek authorization from the board under section 74 of the National Energy Board Act,” said Jonathan Timlin, NEB’s director of regulatory approaches, on May 26 before the Senate committee. “It would have to satisfy conditions before the board would issue an abandonment order under section 74. This legislative change would enable the board to set conditions subsequent to an abandonment order being issued. So if there is a problem with the abandoned pipeline, the problem would be rectified by the company. The problem would not be left to the landowner, for example, to deal with.”

Related: Ottawa tables bill imposing absolute liability of $1 billion on pipeline operators for spills

Over the next five years, “there could be an average of six or seven crude oil incidents per year regarding the federal pipelines,” Labonté told the committee May 26 in reply to a question from Senator Pierre-Hugues Boisvenu, as to the number of accidents that happen in Canada per kilometre of pipeline. “The volume spilled into the environment is at approximately 1,700 barrels of crude oil and, approximately 96% of the volume is recovered by cleaning activities. In general, the cost associated with these incidents is about $3.7 million. So, as a general rule, Canada is very stable and has a very good track record, but to us, six or seven incidents is more than zero, which is our target. So it is positive, but there is still work to do.”

NEB officials “have carried out comparative studies between Europe, the U.S. and Canada,” Labonté noted.